Disability Insurance

As a young entrepreneur, I was doing well. I owned my own business, lived in a beautiful home, drove a luxury car and was in excellent health. I worked out several times a week with a personal trainer and was fit as a fiddle. I never smoked, never had high blood pressure and never took prescription medications. The thought of being disabled never entered my mind . . .until at age 30 when I suffered a massive stroke and was left paralyzed and unable to speak.

In a split second life can change, and everything you've worked so hard to accomplish can be gone. Think about your own life for a moment. Even though you're healthy today, what would happen to you and your family if tomorrow you suddenly were unable to work. What would happen to your business. How would you pay your bills. Who would support your family?

While most people, especially high-achieving entrepreneurs and business owners, don't want to even think about the possibility of a setback, the fact is we are all vulnerable. The only thing that kept me a.oat financially throughout my five-year recovery was the disability insurance I had secured for myself. So even if you think you might never need disability insurance, think again.

But before you rush out and buy just any policy, realize that not all plans are the same. As you investigate various disability insurance policies, keep the following considerations in mind:

COMPARE DEFINITIONS VS. RATES

Every disability insurance policy is different, and this is not a product where you want to simply shop for the most-competitive rates. Buying the cheapest policy is like throwing money away. Your chances of being paid a benefit under a cheap contract are much lower than you receiving benefits from a quality contract. Know the exact language of the definition of "disability." Does the policy use the words "own occupation" or "any occupation" to describe the definition of disability? There's a big difference between the two phrases.

For example, depending on the carrier and the wording of the contract, if you typically work at a desk doing computer or paperwork, and you became paralyzed from the waist down, you could still do your job and would not be considered disabled. However, if you were a Broadway dancer and you became paralyzed, you would not be able to do your job and would be considered disabled. Know what you're buying.

KNOW YOUR TIME LIMITS

Aside from policy definitions, two other factors determine your rate, and both involve time limits. Your first involves how soon you want payments to begin after you become disabled. The options are 30, 60 or 90 days. Base your decision on how much savings you have set aside. If you were to become disabled, how long could you survive on your savings until insurance kicked in? The other time factor is how long you want to receive payments. The options are usually five years, until age 65 or lifetime. If yours is the only income coming into the family, you'll probably want benefits for longer than five years. Choose the time span that makes sense for your lifestyle and situation.

KNOW HOW YOUR PLAN WORKS

Each disability insurance policy is different, which is why you need to fully understand what you're getting for your money. In general, though, should you become disabled, disability insurance will replace 45 to 60 percent of your gross income. Additionally, the monies/benefits you receive can be set up on a tax-free basis should a sickness or illness prevent you from earning an income in your occupation. Best of all, in most cases, the younger you are when you buy disability insurance, the less it costs, and you can lock in that low rate forever. The only thing that increases is the amount of coverage you'd want to obtain. That is, as your income goes up, you'll want to increase your coverage to cover your higher income. At that point, your premium will likely increase.

BE AWARE OF ANY RIDERS

Just like your health insurance policy, which can attach riders or policy enhancements to your insurance for non-covered items, your disability insurance policy can have riders, too. In this case, though, you can add the riders you feel are warranted, such as cost of living increase (COLA); a residual rider if you become partially disabled; or a Social Security rider, which allows Social Security to pay you versus the insurance company (this will lower your premium).

PROTECT YOURSELF

Disability insurance is essential for any entrepreneur or business owner. Think about it: We insure our homes in case of fire or theft; we insure our cars in case of accidents; we insure our health in case of sickness. Since our ability to earn an income is our greatest asset and is what makes owning the homes and cars possible, it only makes sense to insure our ability to work, too. After all, if your ability to earn income went away, what would you do? Life can, and often does, change in a split second.

As you investigate your options for disability insurance, seek the advice and counsel of a professional advisor who can explain the coverage options and definitions. And always use a highly rated, established carrier.

Looking back, I know now that purchasing disability insurance was the best decision I ever made. Without it, I would have been financially crippled. So take the steps necessary to protect yourself and your income. And even though you will never want to actually use your disability insurance, you can rest easier knowing that you have it.

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